Does a Roth IRA Affect Medicaid Eligibility?

A Roth IRA generally does affect Medicaid eligibility, but only for certain applicants. If you are applying for long-term care Medicaid — nursing home coverage or a home and community-based services waiver — the balance in your Roth IRA usually counts as an available asset and can push you past the program’s resource limit, which is as low as $2,000 for a single applicant in many states. If you are under 65 and applying through income-based Medicaid, the account does not count at all. What you can do about it depends on which category you fall into and how much time you have before you need care.

When Your Roth IRA Counts Against You

Long-term care Medicaid uses financial tests rooted in the Supplemental Security Income program. Under those rules, any resource you can access and convert to cash is countable.¹ A Roth IRA fits that description because nothing stops you from withdrawing the entire balance at any time. Unlike a pension with mandatory waiting periods or a workplace plan you cannot touch while employed, a Roth IRA is entirely within your control.

The federal resource limit tied to SSI is $2,000 for a single applicant and $3,000 for a married couple in 2026.² Many states follow this baseline. Some have adopted higher limits, and in a handful the threshold exceeds $100,000. If your Roth IRA balance combined with your bank accounts and other countable assets exceeds your state’s limit, you will not qualify until you bring those assets under the cap. The account is valued at what you could withdraw today, less any early-withdrawal penalty that would apply.

When Medicaid Ignores the Account

Not every Medicaid category applies an asset test. The Affordable Care Act created a separate eligibility track called MAGI-based Medicaid (Modified Adjusted Gross Income), which covers most adults under age 65, children, and pregnant individuals. Under MAGI rules there is no asset test at all, only an income test.³ A younger adult who qualifies through income alone can hold any amount in a Roth IRA without it affecting coverage.

MAGI rules specifically exclude people whose eligibility depends on being aged (65 or older), blind, or disabled. Those applicants fall under Non-MAGI Medicaid, which applies both the income test and the asset test.¹ Long-term care programs sit almost entirely in the Non-MAGI category, which is why the Roth IRA becomes a direct problem for the people most likely to need expensive care.

Payout Status and Why Roths Are Different

Some states exempt a retirement account from the asset test if the account is in “payout status,” meaning you are receiving regular periodic distributions. Traditional IRAs achieve this naturally because the IRS requires minimum annual withdrawals starting at a certain age. A Roth IRA has no required minimum distributions during your lifetime, so you are never forced to take money out.⁴ That flexibility helps with tax planning but hurts with Medicaid planning, because the account generally cannot reach payout status on its own.

A small number of states let you voluntarily set up regular, periodic withdrawals from a Roth IRA to create the equivalent of payout status. If your state allows this, the account balance may become exempt, but every dollar you receive in those periodic payments counts as income instead. Whether that trade helps depends on the account size, your other income, and how your state defines “periodic.” Check your state Medicaid agency’s specific policy on retirement accounts before choosing this route.

Withdrawals Create an Income Problem

Qualified Roth IRA distributions are federal-income-tax-free, but Medicaid does not follow IRS tax definitions when measuring income.⁵ Non-MAGI Medicaid counts virtually any money that reaches you during a given month regardless of its tax treatment. Any withdrawal from your Roth IRA is treated as income in the month you receive it.

That creates a bind. To reduce your Roth IRA balance below the asset limit, you have to withdraw money. But a large withdrawal in a single month can push you over the income limit and disqualify you for that month. The 2026 federal SSI benefit rate for an individual is $994 per month, and many states tie their Medicaid income limits to a multiple of that figure or to the federal poverty level, which is $15,960 per year for one person in 2026.⁶ A lump-sum withdrawal of several thousand dollars will almost certainly exceed those thresholds.

Miller Trusts for Excess Income

If your income, including Roth IRA withdrawals, exceeds your state’s Medicaid income cap, a Miller Trust (also called a Qualified Income Trust) may solve the problem. You deposit your excess income into this irrevocable trust each month, and the deposited amount is no longer counted toward the income test.⁷ The trust then pays your care costs under strict rules. Miss a payment or handle one incorrectly and you lose eligibility for that month.

Not every state uses income caps that require a Miller Trust. Some use a “medically needy” pathway with a different spend-down calculation. Whether you need one, and how to set it up correctly, depends on your state’s rules, so work with an elder law attorney before establishing one.

Protections for a Married Applicant

When one spouse applies for long-term care Medicaid, the program does not force the other spouse (the “community spouse”) into poverty. Federal rules provide a Community Spouse Resource Allowance (CSRA), which is the portion of the couple’s combined countable assets the community spouse may keep. In 2026 the CSRA ranges from a minimum of $32,532 to a maximum of $162,660, depending on the state and the couple’s total assets when the application is filed.⁸

Both spouses’ assets, including both spouses’ Roth IRAs, are pooled together for the initial assessment. The caseworker then determines how much the community spouse may keep (up to the CSRA) and how much the applicant spouse must spend down. If the community spouse’s Roth IRA fits within the allowed CSRA, it is effectively protected. Once the applicant spouse is approved and the community spouse’s share has been allocated, a later transfer of those protected assets by the community spouse does not affect the applicant spouse’s ongoing eligibility.

Spending Down Without Triggering Penalties

If your Roth IRA pushes you over the asset limit, you have to reduce it, but the money must be spent on yourself. Gifts trigger the transfer penalties described below. Purchases that exchange cash for something of roughly equal value, or that cover expenses you would pay anyway, are generally considered legitimate. Common options include:

Paying off debt such as a mortgage, car loan, or credit card balance. You receive fair value in the form of the debt eliminated.
Home repairs and modifications: a new roof, a wheelchair ramp, updated plumbing. Your primary home is generally exempt from the asset test as long as your equity stays within the limit, which runs between $752,000 and $1,130,000 in 2026 depending on the state.⁸
Prepaid funeral and burial plans. Most states exempt irrevocable prepaid funeral contracts and a modest burial fund.
Medical expenses. Paying outstanding medical bills, dental work, hearing aids, or prescription costs directly reduces the balance.
Replacing a vehicle. One vehicle is typically exempt. If your current car is unreliable, using Roth IRA funds to replace it swaps a countable asset for an exempt one.

The principle is fair value. You must receive something roughly equal to what you spend. Writing a check to a family member, funding a grandchild’s college account, or making large charitable donations will likely be treated as gifts.

Medicaid-Compliant Annuities

Federal law addresses annuities purchased with Roth IRA proceeds directly. Under 42 U.S.C. § 1396p, using your Roth IRA to buy an annuity is not automatically treated as giving away an asset, but only if the annuity meets strict requirements.⁷ A Medicaid-compliant annuity must be:

Irrevocable and nonassignable. You cannot cancel it or transfer ownership once purchased.
Actuarially sound. The payout period cannot exceed your life expectancy under Social Security Administration actuarial tables.
Structured with equal payments. No deferred start dates and no balloon payments; every installment must be the same.
Named correctly. The state Medicaid agency must be listed as the primary remainder beneficiary, or second after a spouse or a minor or disabled child. Any balance remaining at your death goes to the state to reimburse Medicaid costs.

Done correctly, the annuity converts a countable lump-sum asset into a stream of monthly income. That income still counts toward the Medicaid income test, so the annuity payments combined with Social Security and any other income must stay under your state’s income cap, or you will need a Miller Trust to remain eligible. The community spouse is the most common user of this strategy, but it can work for the applicant spouse if the numbers align.

The 60-Month Look-Back

Transferring your Roth IRA balance to a family member or anyone else for less than fair market value triggers a penalty under federal law. Medicaid reviews financial transactions from the 60 months before your application date.⁷ Any gift or below-market transfer during that window produces a penalty period, a stretch of time during which you are ineligible for coverage.

The penalty length equals the uncompensated value of the transfer divided by the average monthly cost of private-pay nursing facility care in your state. A $50,000 gift from a Roth IRA could easily result in six months or more of ineligibility. The penalty does not begin until you have spent down to the asset limit and would otherwise qualify, which makes the timing particularly harsh: you have run out of money, but coverage has not started yet.

Undue Hardship Waivers

Federal law allows states to waive the transfer penalty if enforcement would cause undue hardship. You generally must show that being denied Medicaid coverage would threaten your life or health, or would leave you without food, clothing, or shelter.⁷ You carry the burden of proof, and most states require a signed statement from a physician if you claim the denial threatens your health. Waivers are granted sparingly and are not a reliable planning tool.

Estate Recovery After You Die

Even after you qualify and receive benefits, Medicaid has a way to recoup costs. Federal law requires every state to seek recovery from the estates of people who were 55 or older when they received Medicaid-covered nursing facility services, home and community-based services, and related hospital and prescription drug costs.⁷ Some states go further and recover for any Medicaid services provided after age 55.

If your Roth IRA names your estate as beneficiary, or if you die without a designated beneficiary and the funds pass through probate, the balance becomes part of your estate and is subject to recovery. Naming a specific individual as beneficiary can help the funds avoid probate in some situations, but state rules on estate recovery vary and some states define “estate” broadly enough to reach certain non-probate assets. Recovery is deferred while a surviving spouse is alive, or while a child under 21 or a blind or disabled child of any age survives you. This is another reason to consult an elder law attorney well before you need care.

1
eCFR. 42 CFR Part 435 Subpart G – General Financial Eligibility Requirements and Options
2
Social Security Administration. 2026 Cost-of-Living Adjustment (COLA) Fact Sheet
3
Medicaid.gov. Eligibility Policy
4
Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
5
Internal Revenue Service. Roth IRAs
6
Social Security Administration. SSI Federal Payment Amounts for 2026
7
Office of the Law Revision Counsel. 42 USC 1396p – Liens, Adjustments and Recoveries, and Transfers of Assets
8
Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards